Layoffs have become
commonplace in a gloomy economy as tech first try to conserve capital until market conditions improve. Pink slips used to be coordinated
through the human resource department, however, HR professionals are increasingly following their counterparts out the door as they too are
being downsized. An analysis by TechPeople Leaders shows that in the last four months, 20 Chicago tech companies have decided to move forward
without the HR professional they employed previously. Now, many firms are looking to outsource their human resource functions completely.
GROWTH OF PEO INDUSTRY
Professional Employer Organizations, PEOs. Are becoming a popular choice for tech executives. The PEO industry is
growing at an annual rate of 35-40 percent. These organizations partner with clients in a co-employment arrangement that allows the PEO
to handle all of the HR administration including payroll, workers compensation, medical insurance, and unemployment insurance.
PEOs are
replacing many of the more mundane internal HR responsibilities. In companies that have large HR needs, partnering with a PEO works well
because their internal HR person is not able to work on strategic people issues such as training and performance management. Bruce Leon,
president, of an Oak Brook-based PEO called tandem professional services noted: "Technology firms benefit from outsourcing HR as it allows
their key personnel to focus on product development and marketing and not the non-profitable aspect of administration."
ELIMINATION OF THE MIDDLEMAN
Human resource related items such as compensation and benefit administration make up a significant portion of
the cost of doing business. While many companies use their internal HR person to oversee these costs, much of the decision-making is left to
the executive team. As budgets have gotten tighter and the need for cost cutting grows, executives are beginning to handle these HR matters
themselves, further reducing the need for a full-time HR person and increasing the attractiveness of a PEO or outside consultant.
There is
also a growing trend in employee self-service programs that reduce some of the reliance on HR professionals. These self-service programs
allow employees to directly handle HR issues without having to go to the HR department. Rich Gallum, President, bSwift, an online HR/benefits
administration provider said: "With employee self-service systems like ours, companies eliminate, rather than shift some of their HR costs.
Because they only have finite resources, self-service programs give companies the ability to do more with less." Such programs prove helpful
with or without an in-house HR professional.
ACCESS TO CONTRACT HR SUPPORT
In the past, tech companies spent the money necessary to
attract senior level HR executives, often paying them six figure salaries when the economy was red-hot. Now executives are reallocating their
compensation budgets to spend it on positions that directly link to revenue generation such as business development. This, along with the
fact that many companies have downsized dramatically, means that they can no longer justify the large compensation for a senior level HR
executive.
If strategic HR support is still needed, companies are increasingly turning to outside consultants to meet their needs. Using
consultants provides just-in-time HR support where companies only pay when they need the help. Plus, since HR consultants deal with many
clients, they often know about best practices or industry trends. The HR consultants also have strong relationships with various HR service
providers and can help identify new ways for a company to increase the value and lower the costs of their HR initiatives.
THE VALUE OF HR
Let's make one thing clear, the right HR professionals can add a tremendous amount of value and it is a wise move to have an in-house HR
professional if the company can afford one. But how do you know if you have the right HR support? Your responses to these questions may help
you to determine the answer:
1) Does my HR staff demonstrate they know industry trends and HR best practices occurring at other technology
companies?
2) Does our HR staff enhance company reputation by participating in professionals groups and positioning themselves as a
thought leader in the HR space?
3) Can our HR staff handle administration issues AND be a resource to handle our strategic people needs
such as executive coaching, raising employee commitment , and improving people performance?
Deciding to outsource some or all of your HR
needs depends on each organization. Some organizations with as many as 100 employees do not have an in-house HR professional while others
with only 15 employees do. The ultimate answer to this question depends on how much the company wants to leverage the HR function. But recent
trends seem to indicate many Chicago tech companies are choosing to move forward without an HR professional on staff.
Reprinted with express
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